A fascinating, recent report by the Devonshire Research Group, whose recent work on Tesla was featured here one year ago, has moved beyond the micro and tackled on of the most controversial macroeconomic topic possible: what is the true rate of inflation. What it finds is that, like others before it most notably Shadowstats and Chapwood, the accepted definition of inflation, or CPI, is dramatically understated for various reasons, both political and economic.

Needless to say, if and to the extent that the Contrarians are correct, the implications for the U.S. economy and for investors are profound

The Standard of Living may be far more difficult for many Americans to maintain than published statistics suggestReal Economic Growth may be flatter or actually negative, suggesting a prolonged 21st century recession, not recoveryReal Interest Rates, already seen at historic lows, may be strongly negative making Fixed Income returns unattractiveThe Cost of Capital most commonly used to measure investment returns may be far too low

What are your thoughts on this? I can see some major incentives to spin the level of inflation down, but at the same time given the number of economic commentators and academics could they really get away with such a discrepancy?

I met a neighbor who is a moderately well-known financial commentator at the coffee shop. He asked me how I was doing. I replied ambiguously. He raised his eyebrows. I said, 'I am puzzled about how long they can keep things levitated.' He said 'Well, the real economy is going down, but they keep printing money to keep the illusions going'.

If your house in the Hamptons depends on the governments continuing to print money, how long can you resist the urge to tell the truth?

Well, the Roman Empire in the 3rd Century had an Economic Collapse from about 250-275 AD and had managed to keep things together at the expense of the common people. Diocletian later on along with Constantine remade the concept of society to maintain "order". In a way, we here in the United States are undergoing the same process. It all boils down to " whatever it takes".So, it will go on a lot longer than most can conceive.... But at great human pain and suffering.

20 Trillion in US federal debt alone is nutters. So are all of the massive bubbles being blown by people desperately looking for ways to not have their life savings wiped out by lending their money to the TBTF banks.

GregT wrote:20 Trillion in US federal debt alone is nutters. So are all of the massive bubbles being blown by people desperately looking for ways to not have their life savings wiped out by lending their money to the TBTF banks.

marmico wrote:Shadowstats and Chapwood are nutters. 1300% inflation since 1980. LOL.View some 2016 consumer energy prices relative to 1980.https://www.eia.gov/outlooks/steo/realprices/Electricity (cents per kilowatthour) from 5.4 to 12.6 or 135%.Natural gas (dollars per thousand cubic feet) from 3.7 to 10.1 or 175%.Regular gasoline (dollars per gallon) from 1.25 to 2.15 or 75%.

That's unfair Hawk. The new F-150 is nothing like the old one, it's many generations more efficient.

Mr Nordhaus intended this example to illuminate a general point about how flawed economists’ attempts to measure changes in living standards are. Any true reckoning of real incomes must somehow account for the vast changes in the quality of things we consume, he wrote. In the case of light, a measurement of inflation based on the cost of things that generated light and one based on a quality-adjusted measure of light itself would have differed by 3.6% a year.

So a new F-150 actually does 9.5 times more really neat stuff then the old one. You no longer wipe your windows in the rain. You now use a patented squeege action. And there are many stations on the juke box, and a nappy holder in the dash

I think we can agree that a home is the most significant investment a family will make in their lifetime. Look at the link and you will see the steep climb in prices over decadeshttps://www.census.gov/const/uspriceann.pdf

onlooker wrote:I think we can agree that a home is the most significant investment a family will make in their lifetime. Look at the link and you will see the steep climb in prices over decadeshttps://www.census.gov/const/uspriceann.pdf

It's the same with F150. New homes are much greater than old homes. They have much better views, and Great Rooms. Those Big @ss Greatest Rooms Make America Great Again Don't forget the marbled counter tops. So they are really worth 4.5x.

Real inflation has been obfuscated for years by the substitution. The basic idea is that when a particular good or service inflates beyond reach, consumers will choose an alternative. Therefore the inflated good or service will be removed from the "basket" used to calculate inflation.

It's not an entirely unfounded principle, but it does mask real changes in commerce and consumption behind the official figures. Statistics at work!

Stop filling dumpsters, as much as you possibly can, and everything will get better.

There has been almost no real growth for a couple of years now. It's a problem because we are used to 3% growth. The first quarter had an official rate of 0.7%, so that's nowhere near what we feel we need.

The dollars are not constant, of course, nor are taxes, nor are salaries, and I'm comparing the few things I remember buying at the convenience store on my bicycle and for my Mother, and the 1960-ish article about the "Last Four US Cars Under $1000" in Popular Science magazine.

I put real currency inflation at something about 36% per year, simple average. Think of the implications of that for a few moments. 3% growth will not do the job, nor would 30% growth. We are in fact getting poorer, especially on fixed incomes.